The Guardian: Market forces: “Shell, meanwhile, added 5p to 422.5p as dealers bet that the company would announce radical changes at tomorrow's strategy update.” (ShellNews.net)
NEIL HUME
Sep 21, 2004
Boots was one of the worst performers in a weak FTSE 100 yesterday amid talk that next week's half-year trading update from the retail chain could disappoint.
City dealers blamed the jitters on a research note published by the company's broker, Merrill Lynch.
While retaining a buy recommendation, the US investment house said like-for-like sales growth in the core Boots the Chemist business was likely to fall 0.2 of a point shy of its previous forecast of 4%.
In the note, Nick Hawkins, the Merrill analyst, said a number of factors were responsible for the new forecast. The first and most obvious was the wet weather this summer. The second: increased investment in pricing.
Including special offers, Mr Hawkins believes Boots, which is in the middle of a radical restructuring, matched Tesco , off 0.5p at 275.25p, on price over the summer. He is not convinced that Boots achieved the increase in sales needed to pay for the offers and price cuts. He also believes the implementation of a new in-store merchandising system caused some disruption.
Despite announcing the purchase of 300,000 shares for cancellation, Boots still finished 16.5p weaker at 679.5p. The shares have risen 100p since the start of May.
Leading shares closed lower, dragged down by a weak opening on Wall Street and a profits warning from Unilever , 22.5p lower at 459.5p, which unsettled rival Reckitt Benckiser , 21p lighter at pounds 14.11, and key supplier ICI , 5p cheaper at 211.5p.
The final scores showed the FTSE 100 index down 11.5 points at 4579.5. Traders said the loss would have been greater were it not for strength in oil stocks BP and Shell
BP, the UK's biggest company, was marked 9p higher at 528.5p as City traders realised the company was able to resume its share buyback programme following a 30-day blackout period.
BP was forced to put the buyback on ice ahead of the payment of nearly 105m shares to the partners of its Russian joint venture, TNK-BP. Given the strong oil price, German bank Dresdner Kleinwort Wasserstein expects BP to purchase about 5m shares a day for the rest of the year and possibly 10m a day in the short term. Shell, meanwhile, added 5p to 422.5p as dealers bet that the company would announce radical changes at tomorrow's strategy update.
The FTSE 250 index eased 18.2 points to 6277.9 despite good performances from its media constituents following confirmation of merger talks between Capital Radio , up 28p at 458p, and GWR , 24.5p higher at 287p.
The FTSE Small Cap index eased 1.8 points to 2,572.6. Market turnover was poor with a little over 2bn shares changing hands.
In the bond market, the benchmark 10-year gilt closed at 100.87, yielding 4,895%.
Compass Group , the world's biggest contract caterer, was the day's main talking point. Although it closed 4.5p weaker at 225p, a chunky 26m shares were traded amid speculation that someone is running a slide rule over the group, which lost 25% its market value earlier this month following a poor trading update.
Dealers said the talk was of a bid from a private equity group. With a market capitalisation of nearly pounds 5bn, Compass would be a mouthful for even the biggest venture capitalist, though.
Elsewhere, Enodis , which makes catering equipment for the likes of McDonald's and other fast food chains, eased 4.5p to 85.5p on rumours that a profits warning could be on the way.
Big Food Group , the owner of Iceland and cash and carry business Booker, was also un der pressure amid talk that Baugur was unlikely to bid 110p a share once it has completed due diligence.
Given Friday's grim trading update and the fact that the company has a substantial pension fund deficit, analysts would not be surprised if Baugur revised its offer to nearer 90p. Big Food fell 4.25p to 98.5p.
After the market closed, the company announced, at the request of the Takeover Panel, that it would recommend an offer of 110p if one were made.
On a brighter note, WH Smith improved 11.75p to 325.75p after Deutsche Bank upgraded to buy and set a 350p target price.
"We believe the market is ignoring a very interesting management change story," Deutsche's highly rated retail team said.
Among the small caps, NSB Retail Systems firmed 0.25p to 25.75p amid talk that rival Torex Retail, up 1p at 53.5p, is considering an offer of 35p a share.
The trigger for the rumour was half-year figures from Torex which contained the news that the company would "aggressively pursue" its objective of becoming Europe's leading provider of software to retailers. Dealers believe a bid for NSB would go some way to achieving that goal.
There was a buzz around Lavendon , the provider of powered access equipment such as scissor lifts, after two lines of stock - equivalent to 10% of the company - changed hands at 132p, a 9% premium to the opening price.
Earlier this month, Lavendon initiated a strategic review following another poor performance from its German business. The shares closed the session 10p stronger at 131.5p.